Venture Capitalists; Sovereign Wealth Funds; Private Equity & Hedge Funds; High Net Worth & Angel Investors; Film Investors & Lenders and Bankers globally will participate at the International Conference on Film Finance on 27th April 2012 at Mumbai, India.... Read More

The origin of venture capital

In the 1920's & 30's, the
wealthy families of and individuals investors provided the start up money
for companies that would later become famous. Eastern Airlines and Xerox
are the more famous ventures they financed. Among the early VC funds set
up was the one by the Rockfeller Family which started a special fund
called VENROCK in 1950, to finance new technology companies.

General
Doriot, a professor at Harvard Business School,in 1946 set up the American
Research and Development Corporation (ARD), the first firm, as opposed to
a private individuals, at MIT to finance the commercial promotion of
advanced technology developed in the US Universities. ARD's approach was a
classic VC in the sense that it used only equity, invested for long term,
and was prepared to live with losers. ARD's investment in Digital
Equipment Corporation (DEC) in 1957 was a watershed in the history of VC
financing.

While
in its early years vc may have been associated with high technology, over
the years the concept has undergone a change and as it stands today it
implies pooled investment in unlisted companies.

VC
in India

This activity in the past was possibly done by the developmental financial
institutions like IDBI, ICICI and State Financial Corporations. These
institutions promoted entities in the private sector with debt as an
instrument of funding.

For
a long time funds raised from public were used as a source of vc. This
source however depended a lot on the market vagaries. And with the minimum
paid up capital requirements being raised for listing at the stock
exchanges, it became difficult for smaller firms with viable projects to
raise funds from public.

In
India , the need for VC was recognised in the 7th five year plan and long
term fiscal policy of GOI. In 1973 a committee on Development of small and
medium enterprises highlighted the need to faster VC as a source of
funding new entrepreneurs and technology. VC financing really started in
India in 1988 with the formation of Technology Development and Information
Company of India Ltd. (TDICI) - promoted by ICICI and UTI.

The
first private VC fund was sponsored by Credit Capital Finance Corporation
(CFC) and promoted by Bank of India, Asian Development Bank and the
Commonwealth Development Corporation viz. Credit Capital Venture Fund. At
the same time Gujarat Venture Finance Ltd. and APIDC Venture Capital Ltd.
were started by state level financial institutions. Sources of these funds
were the financial institutions, foreign institutional investors or
pension funds and high net-worth individuals. Though an attempt was also
made to raise funds from the public and fund new ventures, the venture
capitalists had hardly any impact on the economic scenario for the next
eight years.